16 About Tax Requirements

This chapter contains the topic:

16.1 French Tax Requirements

France is part of the European Union (EU), which observes the Single European Act of 1987. The Single European Act is an agreement that opens the markets to an area without internal frontiers (boundaries) in which free movement of goods, persons, services, and capital is assured in accordance with the provisions of the Treaty of Rome.

Businesses in France must adhere to EU requirements. Generally, day-to-day activities for businesses in France are the same as those for business in countries that are nonmembers.

It is becoming a common business practice for companies in France to have a fiscal representative in the EU countries in which they do business. This allows the companies to declare the taxes in France that are sent to and paid in the country in which they have the fiscal representation. Fiscal representation allows taxes to be paid in that country's currency. For example, if a French company does business in Germany, the company can use German tax rates on the declaration of taxes and pay the taxes in German marks to the German revenue service.

J.D. Edwards solutions for tax requirements in France include the following tasks:

  • Entering journal entries with tax

  • Printing the EU sales listing

  • Working with Intrastat requirements

  • Printing the tax detail report

  • Printing VAT reports for payments and receipts

16.1.1 About Value Added Tax (VAT)

The value added tax (known as taxe sur la valeur ajoutée or TVA in France) has been in its present form since 1968. VAT is a noncumulative tax imposed at each stage of the production and distribution cycle.

If you work with VAT, you should understand the following terminology and principles:

Terminology Explanation
Output VAT Suppliers of goods and services must add VAT to their net prices. They must record output VAT for goods on the date that they issue invoices and for services on the date that they receive payment. The amount of VAT is determined by applying specific rates to the net selling prices of certain goods and services, such as:

  • Reduced rate - Food, water, medical supplies and books

  • Standard rate - All other supplies of goods and services

  • Other - Medical supplies subject to reimbursement by Social Security, and certain press supplies
Input VAT Input VAT is the VAT paid by the purchaser of goods and services. If the purchasers are subject to VAT of sales (output VAT), they can offset the input VAT they owe against any output VAT that they owe.

Input VAT is generally recovered by offsetting it against output VAT. When input VAT exceeds output VAT, the purchaser can obtain a cash refund.
Nonrecoverable Input VAT Input VAT cannot be recovered on:

  • Goods and services that are not necessary for running the business

  • Expenses that are related to business entertainment

  • Transport of persons

  • Oil-based fuels and lubricants that are transformed and then resold

  • Goods that are provided free of charge or at a substantially reduced price

  • Purchase of cars

  • Services related to goods that are normally excluded from the right of recovery
VAT Returns VAT returns must be completed for each month on a special form (CA3) and filed with the local tax office between the 15th and 24th day of the following month.

You must pay any excess output VAT over input VAT at the time of filing.

In France, the taxpayer is liable for output VAT and input VAT. Output VAT is included on sales. Input VAT is included in the purchase of goods, equipment, and services. Output VAT can be offset against any input VAT. Businesses can also postpone the declaration of VAT in certain circumstances.

It is advantageous for a business to postpone the declaration of VAT payable as long as possible. Certain services are subject to a special fiscal regime that allows you to declare the VAT when payment is made as opposed to when the voucher is recorded. This regime is also valid for accounts receivable transactions where VAT is recognized at the time of receipt instead of at the time of invoicing.

To be exempt from VAT, your business must work within the following guidelines:

  • Goods must be physically moved to another EU country

  • Customers must have VAT identification codes

  • Invoices must show applicable VAT numbers

  • Goods cannot be of a special category, such as vehicles